Name: An 'October surprise' that gets investors excited about the markets
Uploaded: 2020-10-11
Duration: 3 min 35 s
Description: Fortune's Bernhard Warner explains.

An 'October surprise' that gets investors excited about the markets 

So we've arrived at the fourth quarter, which in presidential election years are usually dead quiet. Investors usually want to wait and see what the election outcome is going to be before they put any of their money into the stocks or bonds. But this year is very different. So why are the markets doing so well just three weeks before the election? And the reason is because the pace of the pandemic and the data that comes in every day starting to show that there is a very likely scenario a clean sweep in Washington. We had our October surprise a little early this year, and that is that President Donald Trump came down with covid. You started to see the election odds, and the polls go in favor of his rival, Joe Biden. Now, with the with the polls going so far in favor of Joe Biden, Wall Street and investors are starting to remove some of their anxiety. They start to feel as if they now see okay, this is the likely outcome, and therefore we can start to adjust our portfolios and and our our investment strategy around unknown outcome, as opposed to a complete surprise if there's less uncertainty in the market, investors are actually jumping in a little bit early. Let's take this scenario a little bit one step further if the Democrats control the White House and Congress. The assumption which was unnerving too many not too long ago was that the idea that this would mean higher taxes, more regulation, the things that would potentially put the brakes on the markets rally. We could see a very fat stimulus plan come out. The one that they cannot agree on right now could come out in early in early January. But plus on top of that, we may see things like infrastructure spending, some version of the green New Deal spending in the area of climate and also in healthcare. If you see this kind of commitment to actually spend some money, this could really get investors very excited. The other major factor that we're looking at at the moment, which has the markets concerned, is not just politics, but the pandemic. Obviously any progress that can be made towards a vaccine in 2021 if there is a vaccine, this dramatically changes the way the economy may begin to recover and it would start to give value to stocks that have been overlooked in 2020. This has been a a bull run that has been largely driven by one tiny sector of the market place five company Facebook, Amazon, Apple, Google and Microsoft They represent they are all up to date, 39% this year. So far, the S and P 500 as a whole is up 6%. If you were to take those five companies out of the mix, the other 495 companies that make up the S and P 500 they were all down for the year. So this is really a market rally that is driven by five companies. So you can really call this a rally of the S. And people were in really uncharted territory because usually what Wall Street investors like, they like split government. They like not too much interference. They usually would prefer the Republicans. And the idea is that what Washington what would be good for Washington would be good for Wall Street. It would be good for the investor